Please explain your answers and choose which one to invest on.

Assume short-selling is not allowed Most investors are risk averse (that is prices are determined by risk aversion) Question 1 (14 marks) Answer true/false and explain The following information is relevant for parts (a) (e): There are two assets in the economy, A & B. Asset A has a lower expected return than asset B and both assets have the same standard deviation. Except for question a, investors may choose to invest either in both stocks or only in one of them. d) As long as the correlation between the two assets is less than one then the standard deviation of the minimum variance portfolio will be lower than the standard deviation of each stock on its own. (4 marks) e) Assume now that there are 6,000 stocks traded and all stocks are on the SML line. In this case the situation that is described in the question is impossible and the price of stock A will decrease. (4 marks)